By: Robert Walton

Brief:

The destruction wrought by Hurricane Harvey has forced utilities in the Gulf Coast region to spend around $520 million to repair the damage and improve resiliency to guard against future storms, according to a new analysis done by S&P Global.

According to NOAA, there were 16 weather events in the United States last year that individually caused $1 billion or more in damage. Collectively, natural disasters cost $306 billion in 2017, topping the previous record of $215 billion in 2005.

Insight:

Utilities and their customers are shouldering the increasing cost of hurricanes and other natural disasters.

It took about a year to restore power to all residents, but fully rebuilding and modernizing Puerto Rico is expected to be a more laborious process. Navigant Consulting and the Puerto Rico Energy Resiliency Working Group concluded it would cost $17.6 billion to build a more distributed and renewable grid.

More than 60% of Florida electric customers lost power at some point during Hurricane Irma last year. Duke Energy Florida subsequently filed a petition with state regulators to recover an estimated $381 million in costs associated with the September storm. Tampa Electric filed to recover of $88 million to restore power after Irma and several previous storms.

S&P’s estimates of utility costs from Hurricane Harvey put the bulk of the damage in AEP Texas’ territory. The firm says the utility has requested state regulators sign off on almost $380 million in storm-related costs.

The state’s “inverse condemnation” law potentially puts utilities on the hook for all costs related to fires if their equipment is found to have played a role in starting it — even if there was no negligence.

While lawmakers have declined to pursue changes to the state’s liability rules in this legislative session, this week a bicameral committee released a draft regarding the vulnerability of investor-owned utilities to wildfire damage. PG&E has floated the idea of bankruptcy or restructuring as a result of possible wildfire liability.